Management Advisory Report: Enhancing the Electronic Tax Law Assistance Program
September 2000
Reference Number: 2000-30-164
This report has cleared the Treasury Inspector General for Tax Administration disclosure review process and information determined to be restricted from public release has been redacted from this document.
September 28, 2000
MEMORANDUM FOR COMMISSIONER ROSSOTTI
FROM: Pamela J. Gardiner /s/ Pamela J. Gardiner
Deputy Inspector General for Audit
SUBJECT: Final Management Advisory Report – Enhancing the Electronic Tax Law Assistance Program
This report presents the results of our efforts to identify "best practices" for electronic tax law assistance. We received assistance from state government tax officials in the Commonwealth of Pennsylvania and the State of New Jersey.
In summary, we identified enhancements that could assist the Internal Revenue Service (IRS) in its efforts to improve the accuracy and timeliness of responses provided to taxpayer questions submitted through the IRS’ Digital Daily.
Management’s response was due on September 27, 2000. As of September 28, 2000, management had not responded to the draft report.
Copies of this report are also being sent to the IRS managers who are affected by the report recommendations. Please contact me at (202) 622-6510 if you have questions, or your staff may call Gordon C. Milbourn III, Associate Inspector General for Audit (Small Business and Corporate Programs), at (202) 622-3837.
Placing an Introductory Message on the Internal Revenue Service Web Site
Including a Disclaimer on the Internal Revenue Service Web Site and Taxpayer Responses
Appendix I – Detailed Objective, Scope, and Methodology
Appendix II – Major Contributors to This Report
Appendix III – Report Distribution List
Appendix IV – Glossary of Terms
The Internal Revenue Service (IRS) uses the Electronic Tax Law Assistance (ETLA) program to answer tax law and procedural questions submitted by taxpayers on the IRS’ Internet web site known as the Digital Daily. The ETLA program offers an alternative to the telephone for taxpayers needing tax law assistance, while at the same time increasing accessibility and convenience. This program supports the IRS’ initiative to increase electronic correspondence with taxpayers. In Fiscal Year (FY) 1999, the IRS answered over 262,000 tax law questions, with nearly 350,000 projected for FY 2000.
Customer satisfaction surveys show that over 90 percent of the taxpayers who used the ETLA program were satisfied with the timeliness of responses and would use the ETLA service in the future. This audit was conducted to identify enhancements applicable to the current ETLA program and complements two recently issued Treasury Inspector General for Tax Administration reports. The first of those two reports recommended that the IRS better integrate the ETLA program into its long-term strategy for expanding electronic communications with taxpayers.
Results
Our analysis of the ETLA program identified several opportunities to further improve service to taxpayers. The areas focus on modifications to the current process. These enhancements could assist the IRS in meeting taxpayer demand during its implementation of long-term technological strategies.
Placing an Introductory Message on the Internal Revenue Service Web Site
The ETLA program does not instruct taxpayers to provide sufficient information to assure that their questions can be fully understood. Rather, there are only general instructions on the IRS’ Internet web site, the Digital Daily. This increases the risk that the IRS will provide incorrect or incomplete answers.
Providing an introductory message would help ensure that taxpayers include sufficient information when formulating their questions. For example, we observed that a sample of the IRS’ responses varied from being extremely brief to very lengthy and from very basic to somewhat technical. Further, our testing identified instances where the taxpayers’ questions did not contain sufficient information for Customer Service Representatives to provide reliable answers.
Including a Disclaimer on the Internal Revenue Service Web Site and Taxpayer Responses
The ETLA program does not provide a disclaimer concerning the reliability of the information provided in the IRS’ response to a taxpayer question. The only warning given to the taxpayer is that the answer to the question is based on the IRS’ understanding of the facts presented and that the omission of facts may affect the answer.
In contrast, some IRS publications contain a detailed warning concerning the reliability of the information. The publications warn that the information provided does not cover every situation and is not intended to replace the law or change its meaning. Taxpayers also are warned that a particular IRS publication might cover some subjects on which a court may have made a decision more favorable to them than the IRS interpretation.
Providing a disclaimer on the IRS web site and on the responses to taxpayers could reinforce the significance of providing sufficient information and the potential limitations of using the response provided.
Providing Taxpayers with an Automated Acknowledgement of Receipt and the Expected Time Frame for a Response
Currently, the IRS does not advise taxpayers that their questions have been received or when to expect an answer. The Commonwealth of Pennsylvania Department of Revenue e-mail system automatically transmits a message to the taxpayer acknowledging receipt of the e-mail question. The acknowledgement advises the taxpayer that a response should be received within a specific number of days. Depending on the anticipated volume of questions, Pennsylvania tax officials will revise the acknowledgement message to reflect a 2-day, 4-day, or 6-day response time. The flexibility to change the response time goal allows Pennsylvania to more efficiently use its limited customer service resources to answer tax law questions via e-mail throughout the year.
Besides giving taxpayers the courtesy of a notice of receipt, this practice could make taxpayers less inclined to resubmit their questions prior to the time frame outlined in the message. Pennsylvania tax officials believe that this technique has resulted in more efficient use of customer service resources by spreading the workload over a longer period of time. In addition, they believe that this technique has helped to minimize the use of the compliance resources assigned to the Pennsylvania Department of Revenue when the volume of e-mail questions increases during the tax filing season.
Improving the Quality Measurement System
The ETLA program does not have statistically valid data to determine which call sites are performing satisfactorily or to identify which call sites are under-achieving and in need of supplemental training. The importance of this specific information is evident in the first Sampling Plan that was developed for FY 1999. Instead of changing the Centralized Quality Review Site (CQRS) system to generate monthly accuracy estimates that would be valid at the call site level, the IRS opted to amend the Sampling Plan to generate only national statistics.
The results of the weekly CQRS reviews are made available to the 10 call sites. Although these statistically valid results reflect national rates, the individual call site statistics are being presented in the CQRS database as site level quality rates. However, since the call sites specialize in the types of questions they answer, the complexity levels of the questions differ among these sites, which affects the average response times and accuracy rates. For example, some call sites will answer basic questions concerning filing status or exemptions, while other sites will answer complex questions concerning capital gains and depreciation.
Customer Service function managers use this information at both the national and local levels to help manage the ETLA program. However, this information is not a reliable measurement of quality, and its use as such may result in local managers either believing that the quality of answers is at an acceptable level when there are actually quality problems, or taking unnecessary corrective actions when there are no quality problems.
Summary of Recommendations
Our analysis identified several opportunities for the IRS to enhance the current ETLA program. These include: placing an introductory message and a disclaimer on the IRS web site, including a disclaimer on taxpayer responses, providing taxpayers with an automated acknowledgement of receipt, providing an expected time frame for a response, and improving the quality measurement system.
Management’s Response: Management’s response was due on September 27, 2000. As of September 28, 2000, management had not responded to the draft report.
This review is part of our Fiscal Year (FY) 2000 emphasis area to evaluate whether Customer Service operations are being effectively and economically improved to provide taxpayers with quality customer service, in accordance with Congressional and administrative direction.
The overall objective of the audit was to identify enhancements applicable to the current Electronic Tax Law Assistance (ETLA) program. To accomplish the objective, we assessed the current ETLA program and three Internet web sites that provide answers to tax law questions. We also consulted with tax officials from two state governments that offer electronic communications to taxpayers.
We performed audit work at the Internal Revenue Service (IRS) Headquarters Office; the Centralized Quality Review Site (CQRS) in Philadelphia, Pennsylvania; and call sites located in Nashville, Tennessee, and Philadelphia, Pennsylvania. The audit was conducted between March and June 2000.
This ETLA review complements two recently issued Treasury Inspector General for Tax Administration reports, the first of which recommended that the IRS better integrate the ETLA program into its long-term strategy for expanding electronic communications with taxpayers.
Details of our audit objective, scope, and methodology are presented in Appendix I. Major contributors to this report are listed in Appendix II. In addition, we have included a Glossary of Terms as Appendix IV.
The IRS uses the ETLA program to answer tax law and procedural questions submitted by taxpayers to the IRS’ Internet web site known as the Digital Daily. The ETLA program supplements the toll-free telephone system that is the primary mode of communication for taxpayers in need of assistance. As an alternative to the telephone, the ETLA program generally offers taxpayers increased accessibility and convenience.
The ETLA program also supports the IRS’ initiatives to expand electronic correspondence with taxpayers. Although the IRS has not actively advertised the ETLA program, the number of taxpayer questions answered has doubled each year since the program was started in 1994. In FY 1999, the IRS answered over 262,000 tax law questions. Nearly 350,000 questions are projected to be processed in FY 2000.
Providing top quality service to each taxpayer is one of the strategic goals of the IRS’ modernization plans. Customer satisfaction surveys show that over 90 percent of the taxpayers who used the ETLA program were satisfied with the timeliness of responses and would use the ETLA service in the future.
The CQRS became operational on October 1, 1997, in Philadelphia, Pennsylvania, to monitor the accuracy of the telephone answers provided to tax law questions. In August 1998, the CQRS began evaluating the accuracy of the answers to taxpayer questions received through the IRS’ Internet web site.
On May 1, 2000, the IRS received the Government Employees Insurance Company’s 1999 Public Service Award recognizing the ETLA program for improving electronic customer service.
An analysis of the ETLA program identified several enhancements that could further improve the level of service to taxpayers. These enhancements focus on modifications to the current process and could assist the IRS in meeting taxpayer demand during its implementation of long-term technological strategies. The enhancements include:
Placing an Introductory Message on the Internal Revenue Service Web Site
The ETLA program does not instruct taxpayers to provide sufficient information to assure that the nature of their questions can be fully understood. Rather, there are only general instructions on the IRS’ Digital Daily home page. If the IRS cannot fully understand the questions, then there is a greater risk that it will not provide taxpayers with a satisfactory response.
To request tax law assistance, taxpayers enter questions through the Internet by clicking the mailbox icon on the Digital Daily home page and then proceed to the Tax Law Question section. Taxpayers select a category, provide their e-mail addresses, and submit their questions. The ETLA computer system downloads taxpayer questions from the Internet and makes the questions available for Customer Service Representatives (CSR) to answer in the sequence in which the questions are received.
To answer taxpayers accurately and quickly, a CSR will provide a customized response or use a prepared response, if available. When the questions are answered, the responses are routed back through the ETLA program’s computer system and then sent to the taxpayers’ Internet e-mail addresses.
The current system design does not allow the CSR to probe for additional clarifying information. As a result, the IRS’ response is based on the CSR’s interpretation of the information included in the taxpayer’s question. Unlike the ETLA system, the state government Internet web sites we reviewed provide for direct e-mail exchanges with taxpayers to clarify their questions.
If a taxpayer’s question does not contain sufficient information, the CSR must:
Providing an introductory message would help ensure that taxpayers include sufficient information when formulating their questions. For example, we observed that the IRS’ responses to our sample questions varied from being extremely brief to very lengthy and from very basic to somewhat technical. Further, we observed instances where the question did not contain sufficient information for a CSR to provide a reliable answer.
As part of our research and consultation with state tax officials in Pennsylvania, we determined that their Internet web site includes a detailed introductory notice to taxpayers advising them to include sufficient information in their questions. State tax officials in New Jersey advised that the planned enhancements to their e-mail tax assistance program would include the same features as the Pennsylvania system.
Recommendation
Management’s Response: Management’s response was due on September 27, 2000. As of September 28, 2000, management had not responded to the draft report.
Including a Disclaimer on the Internal Revenue Service Web Site and Taxpayer Responses
The ETLA program does not provide a disclaimer concerning the reliability of the information provided in the IRS’ response to a taxpayer question. The only warning given to the taxpayer is that the answer to the question is based on the IRS’ understanding of the facts presented and that the omission of facts may affect the answer. This statement is not highlighted and is included among three other information statements on accessing forms, accessing the customer satisfaction survey site, and navigating the IRS home page.
In contrast, some IRS publications contain a detailed warning concerning the reliability of the information. The publications warn that the information provided does not cover every situation and is not intended to replace the law or change its meaning. Taxpayers also are warned that a particular IRS publication might cover some subjects on which a court may have made a decision more favorable to them than the IRS interpretation. The position taken in the IRS publication will continue to present the interpretation of the IRS until such differences are resolved by higher court decisions.
Further, the Commonwealth of Pennsylvania Department of Revenue provides a detailed disclaimer of the reliability of the information contained in its e-mail responses and the use of such information in tax appeals.
Providing a disclaimer on the IRS web site and on the responses to taxpayers could reinforce the significance of providing sufficient information and the potential limitations of using the information.
Recommendation
2. The Assistant Commissioner (Customer Service) should include a disclaimer on the IRS web site and taxpayer responses to reinforce the significance of providing sufficient information and the potential limitations in using the information provided in the IRS response.
Providing Taxpayers with an Automated Acknowledgement of Receipt and the Expected Time Frame for a Response
Currently, the IRS does not advise taxpayers that their questions have been received or when to expect an answer. As part of our research and consultation with state tax officials in the Commonwealth of Pennsylvania Department of Revenue, we observed that their e-mail system automatically transmits a message to the taxpayer acknowledging receipt of the e-mail question. The acknowledgement advises the taxpayer that a response should be received within a specific number of days. Depending on the anticipated volume of questions, Pennsylvania tax officials will revise the acknowledgement message to reflect a 2-day, 4-day, or 6-day response time. The flexibility to change the response time goal allows Pennsylvania to more efficiently use its limited customer service resources to answer tax law questions via e-mail throughout the year.
Besides giving taxpayers the courtesy of a notice of receipt, this practice could make taxpayers less inclined to resubmit their questions prior to the time frames outlined in the message. Pennsylvania tax officials believe that this technique has resulted in more efficient use of customer service resources by spreading the workload over a longer period of time. In addition, they believe that this technique has helped to minimize the use of the compliance resources assigned to the Department of Revenue when the volume of e-mail questions increases during the tax filing season.
In the IRS, the goal is to answer a question within 2 workdays. The Customer Service function established the goal as a response time that taxpayers would deem reasonable. There was no research performed in this area nor were there any contacts made with other organizations to determine a reasonable response time. The 2-day response time is not an industry standard.
In FY 1999, the IRS did not achieve the goal of responding to taxpayers’ questions within 2 workdays. The average response time for the over 262,000 tax law questions that were answered during all of FY 1999 was 3.5 workdays. However, customer satisfaction surveys showed that 92 percent of the taxpayers who used the ETLA program were satisfied with the response time of the answers received from the IRS.
In contrast, during the heaviest volume period, from January 1, 2000, to April 17, 2000, the IRS’ 2-day goal was surpassed. The average response time for the nearly 221,000 questions that were answered during this 3.5-month period was 1.3 workdays.
The dramatic decrease in the average response time was accomplished at a great cost to the IRS but with very little change in customer satisfaction. Although the IRS exceeded its performance goal, it needs to balance the level of service between cost and customer satisfaction. For example:
By providing an acknowledgement message along with an anticipated response time, the IRS could:
Recommendation
3. The Assistant Commissioner (Customer Service) should provide taxpayers with an automated acknowledgement of receipt and the expected time frame for a response. Besides giving taxpayers the courtesy of a notice of receipt, this technique may result in more efficient use of resources.
Improving the Quality Measurement System
The CQRS became operational during October 1997, in Philadelphia, Pennsylvania, to monitor the accuracy of the telephone answers provided to tax law questions. In August 1998, the CQRS began evaluating the accuracy of the answers provided to taxpayers through the ETLA program. For FY 1999, the CQRS results showed that the IRS achieved a national accuracy rate of 75 percent for tax law questions. For FY 2000, the Customer Service function established an accuracy goal of 79 percent.
The CQRS needs to provide accuracy rates that are statistically valid at the call site level
The CQRS randomly selects responses based on a Sampling Plan developed by the Statistics of Income Division. The Sampling Plan for FY 1999 projected that the monthly accuracy estimates would be valid at the call site level. The plan was designed using a 70 percent expected accuracy rate with a 90 percent confidence level and a precision margin of plus or minus 5 percent. A total of 13,680 answers were scheduled to be quality reviewed.
However, the CQRS system was not designed to select sample cases by call site and is only able to select a sample from the national population of closed answers. As a result, the FY 1999 Sampling Plan was amended to allow the CQRS to review 3,450 answers in order to statistically estimate the national accuracy rate. Therefore, the quality results are not statistically reliable at the call site level.
The call sites specialize in the types of questions they answer, so the complexity levels of the questions differ among these sites. For example, some call sites will answer basic questions concerning filing status or exemptions, while other sites will answer complex questions concerning capital gains and depreciation. This affects the average response times and accuracy rates.
Because accuracy rates vary among tax law issues, the ETLA program does not have statistically valid data to determine which call sites are performing satisfactorily or to identify which call sites are under-achieving and in need of supplemental training. The importance of this specific information is evident in the first Sampling Plan that was developed for FY 1999. Instead of changing the CQRS system to generate monthly accuracy estimates that would be valid at the call site level, the IRS opted to amend the Sampling Plan to generate only national statistics.
The results of the weekly CQRS reviews are made available to the 10 call sites. Although these statistically valid results reflect national rates, the individual call site statistics are presented in the CQRS database as call site level quality rates. Customer Service function managers use this information at both the national and local level to help manage the ETLA program. However, this information is not a reliable measurement of quality, and its use as such may result in local managers either believing that the quality of answers is at an acceptable level when there are quality problems, or taking unnecessary corrective actions when there are no quality problems.
The Customer Service function should coordinate with the CQRS function and the Statistics of Income Division to determine the optimum sampling design that would meet the quality assurance needs of the ETLA program. The Sampling Plan should be designed to provide accuracy rates at the call site level as well as national statistics.
Recommendation
4. The Assistant Commissioner (Customer Service) should improve the quality measurement system by coordinating with the CQRS function and the Statistics of Income Division to determine the optimum sampling design that would meet the quality assurance needs of the ETLA program. The Sampling Plan should be designed to provide accuracy rates at the call site level as well as national statistics.
The Customer Service function can more effectively and economically improve the current ETLA program to provide taxpayers with quality customer service. Our analysis of the ETLA program and three Internet web sites and consultations with tax officials from two state governments identified several opportunities to further improve the level of service to taxpayers. The areas identified focus on modifications to the current process and could assist the IRS in meeting taxpayer demand during its implementation of long-term technological strategies to increase electronic correspondence with taxpayers.
Appendix I
Detailed Objective, Scope, and MethodologyThe overall audit objective was to identify enhancements applicable to the current Electronic Tax Law Assistance (ETLA) program. The following steps were completed to accomplish the audit objective:
I. To identify enhancements that could assist the Internal Revenue Service (IRS) in its efforts to improve the accuracy and timeliness of information provided via e-mail responses to taxpayer Internet questions, we:
a. Selected a judgmental sample of 50 Small Business/Self-Employed Taxpayer questions that were posted to Internet Bulletin Boards and submitted them to the IRS and 3 commercial Internet web sites.
Appendix II
Major Contributors to This ReportGordon C. Milbourn III, Associate Inspector General for Audit (Small Business and Corporate Programs)
Philip Shropshire, Director
Edmond Watt, Audit Manager
Richard Turner, Senior Auditor
Benjamin Hawkins, Auditor
Frank Maletta, Auditor
Appendix III
Report Distribution ListDeputy Commissioner Operations C:DO
Chief Information Officer IS
Chief Operations Officer OP
Assistant Commissioner (Customer Service) OP:C
National Taxpayer Advocate TA
Office of the Chief Counsel CC
Office of Management Controls CFO:A:M
Director, Customer Service Compliance, Accounts and Quality OP:C:A
Director, Customer Service Telephone Operations and Systems OP:C:T
Director, Customer Service Center OP:C:CS
Director, Legislative Affairs CL:LA
Director, Office of Program Evaluation and Risk Analysis M:O
Audit Liaison: Assistant Commissioner (Customer Service) OP:C
Appendix IV
Glossary of TermsCall Sites/Call Centers – Any location within a company where people, telephones, and computers handle quantities of incoming and/or outgoing calls. The Internal Revenue Service (IRS) sites/centers provide assistance to taxpayers by answering questions, providing assistance, and resolving account-related issues.
Centralized Quality Review Site (CQRS) – The IRS’ corporate monitoring system for its main toll-free telephone lines. The role of the CQRS is to provide a single product review system that provides qualitative and quantitative data for use in determining whether the IRS is fulfilling its three goals of increasing voluntary compliance, reducing taxpayer burden, and improving quality-driven productivity and customer satisfaction.
Collection – The function of the IRS that is responsible for collecting the proper amount of Federal tax from all persons who have not filed returns and/or paid tax as required by law.
Compliance – A term used to describe the IRS’ Collection and Examination functions whose mission is to ensure taxpayer compliance through collecting delinquent taxes and auditing tax returns to determine correct tax liabilities.
Customer Satisfaction Surveys – A voluntary survey to measure how satisfied taxpayers were with the service provided by the IRS.
Customer Service – When capitalized in this report, refers to the function in the IRS that is responsible for direct taxpayer contact in such areas as toll-free telephone assistance, electronic tax law assistance, and "walk-in" site assistance.
Customer Service Representative (CSR) – An IRS employee who may work with taxpayers on the telephone, as well as handle paper inventory resulting from telephone contacts.
E-Mail – Electronic text mail used for the transmission of messages sent from a computer terminal or computer system.
Examination – The IRS function that administers a national audit program involving the selection and examination of all types of Federal tax returns to determine correct tax liabilities.
Filing Season – The period from January 1 through April 15 of each calendar year during which most taxpayers typically file their individual income tax returns.
Fiscal Year (FY) – A 12-month period that ends on the last day of any month except December. The IRS’ fiscal year runs from October 1 of one calendar year through September 30 of the following calendar year.
Full Time Equivalent (FTE) – The number of full-time employees that would be required during a period to perform the work done during that period. To calculate the FTE, divide the number of seconds of work performed by the number of seconds in the period. For example, if employees spent a total of 7,200 seconds handling calls during a half-hour (1,800 second) interval, the FTE for call handling during the interval is 7,200 person-seconds/1,800 seconds = 4 persons.
Internet – A network of many large computers joined together over high-speed data links.
Scheduling – The process of forecasting the workforce that will be needed to meet the anticipated customer demand.
Toll-Free Telephone System – A variety of IRS toll-free telephone lines to assist taxpayers in meeting their Federal tax obligations.